Moving your retail business online: COVID-19 and the rise of small business
( 6 -7 minute read)
author: Liane
For the retail industry, any economic downturn has its casualties. But COVID-19 has wreaked a special sort of havoc on face-to-face retail, effectively grinding it to a complete halt.
With the exponential rise in eCommerce sales, a boom in social media usage and hundreds of big brands collapsing under the strain, are we entering the era of the small business?
The impact of COVID-19 on the retail industry
As with any sudden cultural or economic shift, there have been winners and losers in the last few months. It often feels as though not a day goes by without hearing of another high street store closure: Monsoon, Debenhams, Cath Kidston, and Laura Ashley have all announced either full or partial closures since Coronavirus hit.
Even before COVID-19 struck, high streets across the country were looking sparse, with high rent costs and an increase in online shopping forcing many long-standing retailers out of the running. Now, with retail prices falling by a huge 2.4% in May (the largest monthly drop since 2006), even the retail giants are facing financial difficulties. Clothing and furniture retailers are facing the biggest struggles, with consumers prioritising spending on food and essential items.
And, with only 6% of people saying they’ll make an effort to shop more in-person after COVID-19, we’re likely to see long and lasting impacts on the high street.
The rise of eCommerce and DTC brands
Ecommerce isn’t new. For years now, we’ve seen hundreds and thousands of retailers making the most of online sales - and plenty of new retailers who are online-only. Online shopping has become the default for many of us as it often aids convenience and gives us time for other, more enjoyable things in life. With COVID-19 closing down high streets and restricting our shopping abilities, 48% of us have done more online shopping since lockdown.
With just 9% of respondents saying they’ll return to the high streets ‘immediately’ once shops reopen, eCommerce stands to benefit hugely from the pandemic. Online shopping is the natural solution to the restrictions placed on us by COVID-19: it’s the safe, easy and often cheaper option than in-person shopping, especially given the rise of Direct To Customer (DTC) brands.
The DTC model benefits consumers as it allows us to buy directly from the brand themselves at a better cost — there are no middleman fees. The model also works well for brands as it doesn’t rely on margin-squashing deals with bigger outlets. It also offers them the opportunity to build personal, long-lasting relationships directly with their customers.
The beauty industry was one of the first to see movement towards the DTC model with brands such as Beauty Pie, Glossier and Versed quickly making their mark on the industry. Others taking the world by storm include Warby Parker, Birchbox and Dollar Shave Club.
However, it’s worth nothing that the Instagram-friendly visuals, san serif fonts and quirky messages can only get a brand so far. Most industries are now full of tough competition and growing a strong, long-lasting brand takes a lot more effort. If you want to read more about what the future may hold for DTC you can do so here: Reinventing the Direct-to-Consumer business model.
With online experiences getting better by the day and more previously-in-person businesses pivoting to online platforms, we certainly expect to see eCommerce continue its growth trajectory in the coming months.
Big brands vs small businesses
Online shopping is growing, and there’s no escaping that fact. So how can small businesses compete with the big players?
It might seem futile to even try, but does that mean we shouldn’t?
Amazon dominates eCommerce in almost every retail sector. Their Q1 global sales increased by 26% this year to a whopping $75.5 billion, transactions total an average of $4,722 every single second, and only 4% of 26-35 year olds don’t shop with the retail giant. That is a lot of consumer spending.
If trying to directly compete with Amazon is your goal - good luck. But there’s plenty of space out there in the online world for your small business to make its mark, without needing (or even wanting) to reach the dizzying heights of Amazon.
For small businesses on our high streets, COVID-19 has been tough. Forced to close with very little financial security, and very little ability (or resources) to pivot to online sales, has been devastating for many. But, as is the theme here: there have been plenty of winners, too.
Small businesses have a unique ability to serve their customers and their communities with a touch of personality and individuality that Amazon can never hope to attain. And, during this period of slowing down, taking stock and reflecting on what really matters, many of us are realising that the experience of shopping small is worth an extra few pounds. We’ve been advocating for small businesses for as long as we can remember, but we’re really seeing a shift in consumer attitudes and a buoying sense of community around our local businesses as well as those we work with.
With the shift towards eCommerce, the financial barriers to entry are lower than ever before. With no rent costs, business rates, or other physical overheads, small businesses pivoting to eCommerce are noticing higher profit margins and lower expenditure than ever before - while big brands on the high street are stuck in multi-year leasing agreements with little revenue being generated.
While small businesses may not be able to compete financially with the big brands instantly, there’s a lot they can do to be successful, build communities and serve loyal customers time and time again.
Social media for small business
While we’ve been spending more time at home, our social media use has skyrocketed. Worldwide, 44% of people say they have increased the amount of time they spend on social media - and, given the average daily use of social before COVID-19 was 144 minutes, this means there are thousands of potential customers scrolling social media all day, every day.
Social media is a must-have for businesses, but it’s often difficult to gain traction and persuade decision-makers that it’s worth doing, especially with organic reach plummeting and ad costs increasing. How can small businesses compete with brands who spend thousands of pounds on photography, videography and creative to produce polished content every single day?
A huge positive we’ve seen coming out of the last few months is a levelling of the playing field on social media - and some incredibly creative responses to the pandemic. Big brands, while they may have a content-reserve from previous shoots or campaigns, have been unable to produce new content to the standard they’re used to. Studios have been closed and social distancing measures have crippled campaign plans. Big brands are having to think creatively with the resources they have - which is what small businesses have been doing since the dawn of time.
For the first time, content’s effectiveness isn’t determined by the amount of investment that’s gone on behind the scenes. It’s determined by creativity, consistency and showing up for your community, even if you can’t serve them in the way they’re used to. Bonus tip: share behind the scenes content to build a loyal audience.
Plus, with hundreds of businesses choosing to turn off ad spend completely, or dramatically reduce it, the average cost per click for social advertising has fallen by 30.8% to just $0.09. Small businesses using social advertising effectively are realising the power it has, especially if your target demographic is young people: 38% of 26-35 year olds have bought a product after seeing an ad on Facebook, and 35% after seeing an ad on Instagram. Social advertising has a unique ability to target, retarget and convert audiences into paying customers.
The future of the high street
Only time will tell what our high streets look like in the future, especially in the run-up to Christmas where some retailers see a huge proportion of their annual revenue generated in a matter of weeks.
In the short-term, we’re expecting to see a steady growth in eCommerce sales, despite retail stores being given the green light to reopen from 15th June. People are realising the power of online shopping and are unlikely to return entirely to their normal shopping habits - especially if they’ve discovered local or small businesses providing a personalised shopping experience. The benefits of eCommerce, for many, will outweigh the novelty of reopened high street stores.
Is it too late?
Never.
For small businesses in particular, while COVID-19 has made things tough over the last few months and it’s been make or break for many, the playing field has levelled out and the opportunity to compete effectively with big brands, particularly via social media, has never been greater.
As I touched on before, this is a trend that’s not going anywhere soon and for those still deliberating whether to move their retail brand online, now is the time.
If you’ve been struggling to keep up with social media during COVID-19 or need to make a splash with the re-launch of your retail business, we’re here to help. See what we can do for your social media, or get in touch with our social media experts.
